AT&T’s mad, mad plan to charge wireless app developers

AT&T won’t give up on trying to monetize its pipes, and thanks to a lack of network neutrality on wireless networks, its limited data plans, and a hunger for bandwidth-consuming mobile apps, it may have found a way to charge the likes of Facebook, Spotify and startups offering bandwidth-heavy applications for the privilege of sending their bits over Ma Bell’s cellular network.

According to a story in the Wall Street Journal, which quotes AT&T exec John Donovan, the company is looking at charging app developers for the data consumers use while playing with their apps. Donovan likened it to a 1-800-style service where users could download the app without the data usage being charged on the consumer’s bill. Instead, an app developer would pay for the downloaded bits. From the WSJ story:

What they’re saying is, why don’t we go create new revenue streams that don’t exist today and find a way to split them,” Mr. Donovan said. A customer nearing his data limit for the month could be more likely to download a movie if the content provider covered the price of the data transmission.

Haven’t we been here before?

The stated thinking from AT&T is that the pricing would encourage customers worried about their bandwidth caps to still try new services, but the reality is this is a brilliant way to implement the double-sided pricing model ISPs have coveted for years. And without net-neutrality rules protecting wireless applications that don’t deliver voice or video-conferencing style services, this could affect Facebook, Spotify, maybe Netflix and any startup considering a hot new bandwidth-using mobile application.

I have asked AT&T several questions about the service, and haven’t heard back. But at its heart, the toll-free numbers Donovan likened this plan to in the WSJ story may offer a “free” service to consumers in terms of not counting against their data limits, but it implicitly provides a toll on the participant providing the app. In the telephone world that generally was a company or a call center operated on behalf of a company. But in the data and app world, the proposed toll could hit small and large providers alike, and thus stymie innovation.

This fear of halting innovation by making small providers pay to transmit their bits across carrier networks was one of the bigger arguments for network neutrality — or the idea that service providers couldn’t discriminate against packets moving across their networks. But with this plan AT&T may have found a means to discriminate using pricing, and possibly could halt innovation by companies that can’t pay to offset their users’ data.

What a lovely app you’re building! It would be a shame if data-strapped consumers won’t download it

Full-on net neutrality doesn’t apply in wireless networks, unless an operator is trying to block a competitive voice or video services such as Skype. As I wrote last year, that lack of wide scale protection could still cause problems for chatting within social networks, online games and other services, meaning companies such as Facebook, group texting apps or popular games may be affected. I’ve reached out to the FCC and several startups to see what people think. The FCC had no comment.

It’s also unclear if such pricing would run afoul of net neutrality rules but the big opening here for AT&T is the rollback of its unlimited plans. Give consumers a $10 per GB overage fee and you’ve given them something to fear when downloading a mobile application. So if someone hesitates before playing Pandora or watching a YouTube clip, then half of AT&T’s job is done when it comes to coercing developers to sign up for this toll 1-800 plan. If some applications sign up to pay this fee, then consumers will become acclimated to their app habits getting paid for by their dealer, making the cost of delivering a successful app a lot higher.

And if those apps choose to pay that cost, then AT&T has managed to do what it has tried to do since Ed Whitacre famously put forth the idea in 2005 — force those pesky web companies to pay to use AT&T’s pipes. Way to play the long game, Ma Bell.